S&P Global Ratings has affirmed Bermuda’s long-term sovereign credit rating at ‘A+’ and its short-term rating at ‘A-1’, with a stable outlook.
This reflects expectations of a steady macroeconomic environment underpinned by strong institutional frameworks, prudent fiscal policy, and a high-income economy.
The stable outlook indicates S&P’s view that Bermuda will maintain sound economic and fiscal fundamentals over the next two years.
The territory’s external asset position remains a key strength, supported by continued current account surpluses and large foreign asset holdings.
S&P expects that ongoing economic growth, coupled with the implementation of a corporate income tax (CIT), will contribute to fiscal consolidation, reduce borrowing costs, and lower net general government debt.
Bermuda’s primary economic driver remains its international financial services sector, particularly insurance and reinsurance.
The industry continues to attract global participants due to the territory’s robust regulatory environment, recognised by the EU and US, and a highly skilled workforce. While the CIT introduces a new layer of taxation, it aligns Bermuda with the OECD’s global minimum tax framework and is not expected to disrupt the sector’s competitiveness significantly.
The fiscal outlook is supported by expected CIT revenues of approximately 1.5% of GDP in fiscal year 2025–2026, increasing to 5% annually from 2026–2027.
S&P anticipates these revenues will facilitate debt reduction, with $500 million in maturities scheduled for early 2027.
As a result, net general government debt is projected to fall below 3% of GDP by fiscal year 2026–2027. Interest costs are expected to decline, averaging 6.8% of revenues through 2028.
In S&P’s view, Bermuda’s institutions are effective, and its political environment is stable. The Progressive Labour Party’s re-election in early 2025 ensures policy continuity.
The government’s commitment to fiscal prudence and low taxation for most residents and businesses remains intact, and its approach to economic management is broadly consistent across political cycles.
Bermuda also benefits from a high level of external liquidity. The territory’s narrow net external creditor position is forecast at around 198% of current account payments from 2025 to 2028, reflecting large external assets held by both the government and banking sector.
Despite the high gross external financing requirement, the structure of external liabilities and assets, particularly in the banking system, supports S&P’s external assessment.
Although the economy is concentrated in financial services, S&P does not foresee near-term shocks to this structure. However, downside risks include a weakening of the insurance sector due to consolidation, job losses, or adverse global developments.
Should these risks materialise and lead to sustained fiscal deficits or a drawdown in liquid assets below 25% of GDP, the ratings could come under pressure.
Conversely, if Bermuda demonstrates stronger-than-expected economic performance, enhanced diversification, or faster debt reduction, S&P could consider an upgrade. Improvements in real GDP growth, coupled with further declines in interest costs and maintenance of a strong external position, would support upward rating momentum.
Bermuda’s fixed exchange rate with the US dollar limits its monetary policy autonomy. Nevertheless, S&P considers the territory’s macroeconomic management sound. Inflation is expected to average 2.6% between 2025 and 2028, despite some pressures stemming from US tariffs and global supply dynamics.
S&P maintains that Bermuda’s combination of high income, strong external metrics, and credible policymaking supports the current rating. The territory’s performance in the face of evolving global tax and economic frameworks will be a critical factor in future rating assessments.
